The beauty of the Modigliani and Miller model is that if you relax the restrictive assumptions,it still demonstrates that capital structure does not impact the value of the firm.

Question

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When the restrictive assumptions of the Modigliani and Miller model, such as no taxes, no bankruptcy costs, and symmetric information, are relaxed, the model shows that capital structure can indeed impact the value of the firm. For example, introducing corporate taxes into the model demonstrates that debt financing can create a tax shield, thus affecting the firm's value.

The Beauty of the Modigliani and Miller Model Is That